Fed Balance Sheet Composition Update

Tyler Durden's picture

For those curious how the Fed's ongoing takeover of the US bond market looks like, below is a visual update.

A simple maturity distribution:

Over the week ending October 3rd, the average maturity of the Fed's System Open Market Account (SOMA) treasury holdings increased from 118.03 to 118.62 months. Before the onset of the Maturity Extension Program (MEP), the average maturity of the Fed's treasury holdings was around 75 months. The Fed has surpassed the original average maturity target of 100 months for the first MEP.

The average duration of the Fed's (SOMA) holdings increased to 7.31 years (87.67 months) for US Treasuries in the October 3rd week from 87.33 months in the prior week. The measurement of duration risk translates to an average price decrease of approximately 7.31% for each percentage point increase in all yields.

The net effect of maturing assets and treasury issuance over the week caused the average maturity of all marketable treasury securities to rise to 65.36 months from 65.28 months. The stock of the Fed's holdings reduced the average maturity of marketable treasury debt held by the private sector by 9.64 months from 9.58 months in the prior week, and the privately held public debt average maturity rose to 55.73 months from 55.70 months.

Since the recession, the Fed has lengthened the average maturity and duration attributes of the SOMA. It appears that they have reduced the supply of issues mostly in the seven to ten year range, owning 70% of some issues in that range.

And the punchline: The amount of ten-year equivalents held by the Fed increased to $1.333 trillion from $1.325 trillion in the prior week, which reduces the amount available to the private sector to $3.550 trillion. There were $4.884 trillion ten-year equivalents outstanding. The Fed owns 27.2% of the bond market expressed in 10 year equivalents. Assuming the Fed's balance sheet rises to $5 trillion by the end of 2014, this number will rise to nearly 60%.

Source: SMRA and St Louis Fed

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ItsEvolutionBaby's picture

Banana Republic bitchez!

WarriorClass's picture

Abraham Lincoln's War Against the States ended with the enslavement of us all and left the Federal Government the final power in this country. If you doubt this you should read any of historian Thomas J. DiLorenzo's books on Lincoln, as well as "Lincoln Uber Alles" by Emison. "The Party of Lincoln" is no better than the Marxist Democrats, and until people see through their deception, it's not going to get any better. Another good book is "The Perils of Diversity: Immigration and Human Nature" by Byron M. Roth, and "Alien Nation: Common Sense About America's Immigration Disaster" by Peter Brimelow.

JPM Hater001's picture

Yes, a moral victory was had but a constitution had to die.

Buckaroo Banzai's picture

A "moral victory"??? Really??

Lincoln was responsible for more American deaths than every other President combined. Lincoln supported an Amendment that would have permanently enshrined slavery in America. The "great emancipator" only freed slaves in areas that the Union did NOT control, and wasn't around when the 13th Amendment was passed. Lincoln installed an all-powerful Federal government that forever destroyed the sovereignty of the States.

Slavery ended all over the world in the mid-19th century...peacefully in every country EXCEPT the US. So how can we be sure that it wouldn't have ended in the US peacefully as well sometime later in the 19th century?

There is no justification whatsoever for any of Lincoln's actions. He was a murderous tyrant. There is no getting around that fact.

knukles's picture

The Greatness of Lincoln is Redacted Directed History

Doña K's picture

Was he from Chicago by any chance?

Western's picture

Lincoln was the last president of the STATE of the USA, before it was taken over by a parasitic CORPORATION of the USA.


In fact, the STATE of the USA has been frozen ever since, and he still is the president... you can find him (Abraham Lincoln) in Washington DC right now.


Google the similarities between Zeus' throne and Lincoln's throne.

perelmanfan's picture

I am 57, and have seen more hockey-stick graphs in the last couple of years than in the rest of my life put together. Regardless of the phenomenon described, they will all revert to the mean. All of them. Be ready.

gmak's picture

I am less concerned with the average maturity of the Fed's balance sheet, than the average maturity (and maturity profile) of the Treasury.

urbanelf's picture

The private sector wanting their money closer and closer to now...  Scary.

Winston Churchill's picture

Everyone knows the long term UST's are junk.

The only exit strategy I see for the FedRes is to offload that junk onto 401k investors at

the point of Uncle Sam's guns.


Doña K's picture

Cheaper to redeem your 401k pay the tax and buy PM's.

MeelionDollerBogus's picture

act early. "guns" = "you can't redeem shit and if you did they'll shoot you"

virgilcaine's picture

The Fed has an exit strategy for this?      chirp...

pragmatic hobo's picture

when EU breaks up there will be massive scramble for Non-EU, AA+ or higher, government bonds. Bernanke will make a killing.

DeadFred's picture

It's an obvious exit strategy, just stop buying and wait 10-30 years and they're clean. Elsewise wait five years and have the new government's treasury declare all bonds from the old regime null and void. See there are many ways this could be resolved as long as you don't get too anal and demand a good exit.

ebworthen's picture

"The amount of ten-year equivalents held by the Fed increased to $1.333 trillion..."

SOMA indeed.

Pasadena Phil's picture

IMHO, to look at the Fed's balance sheet in terms of how we would feel if we owned this portfolio as individuals is backwards. The Fed is not investing for profit. The Fed is taking control of markets.

What the Fed has accomplished is to delay that catastrophic day when an avalanche of maturities would have to be rolled over into higher interest rates from about 7 years to about 10 years. They started out by buying lots of short-term maturies whose interest income, maturity proceeds and ourtight sales at a profit were used to buy longer term maturities as interest rates kept declining.

The problem is that every time the Fed buys more time for Congress to address the problems, Congress opts to crank up spending even more while piling on even more debt. There is no reason to believe that this will change and it probably doesn't matter any more.

The day when we could have avoided a generation of social upheaval has long since passed. We are soon going to rediscover the laws of math and how they are brought to bear on human nature. Dark days are approaching fast. If you are not yet prepared, time is running out. Get ready.

Rainman's picture

edit: Fed balance sheet goes to $5 trillion by the end of 2014. Not that it matters. The Fed is where democracy goes to die.

q99x2's picture

Great reasons to abolish the FED. Repudiation bitchez.

dojufitz's picture

So if i buy a hockey stick i'm rich or broke?

Half_A_Billion_Hollow_Points's picture

you might be able to defend yourself from the zombies at the pump.